How to Control the Fiscal Costs of Public-Private Partnerships
IMF How To Notes, October 16, 2018
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Bibliographic details
- Authors: Timothy C Irwin, Samah Mazraani, Sandeep Saxena
- Published: October 16, 2018
- Series: IMF How To Notes
- DOI: https://doi.org/10.5089/9781484380925.061
Overview
- This note examines what finance ministries can do to ensure that public-private partnerships (PPPs) are used wisely.
- PPPs can invite private participation in infrastructure development and service provision and can help improve public services.
- However, without strong governance institutions, PPPs can generate risks and unexpected costs that may undermine fiscal sustainability.
Main findings
- In the short term, PPPs may appear cheaper than traditional public investment.
- Over time, PPPs can turn out to be more expensive and can undermine fiscal sustainability, particularly when governments ignore or are unaware of deferred costs and associated fiscal risks.
- Effective management of PPPs requires recognizing that apparent short-term savings can mask long-term fiscal liabilities.
Policy recommendations
- Governments should:
- Develop and implement clear rules for the use of PPPs.
- Identify, quantify, and disclose PPP risks and expected costs.
- Reform budget and government accounting frameworks to capture all fiscal costs comprehensively.
Key themes and concepts
- Governance institutions: necessary to manage PPP risks and avoid unexpected costs.
- Deferred costs and fiscal risks: central to the assessment of PPPs' true fiscal impact.
- Budget and accounting reforms: required to ensure comprehensive capture of fiscal costs from PPPs.
Source: How to Control the Fiscal Costs of Public-Private Partnerships, Timothy C Irwin, Samah Mazraani, Sandeep Saxena, October 16, 2018 (IMF How To Notes).
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